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Good morning, and welcome to the Realogy Holdings Corp First Quarter 2022 Earnings Conference Call via webcast. Today's call is being recorded, and a written transcript will be made available in the Investor Information section of the company's website tomorrow. A webcast replay will also be made available on the company's website. At this time, I would like to turn the conference over to Realogy's Senior Vice President, Alicia Swift. Please go ahead, Alicia.

Thank you, Craig. Good morning and welcome to Realogy's first quarter 2022 earnings conference call. On the call with me today are Realogy's CEO and President, Ryan Schneider; and Chief Financial Officer, Charlotte Simonelli. As shown on Slide 3 of the presentation, the company will be making statements about its future results and other forward-looking statements during this call. These statements are based on the current expectations and the current economic environment. Forward-looking statements and projections are inherently subject to significant economic, competitive and other uncertainties and contingencies, many of which are beyond the control of management, including among others, constrained inventory levels, rising inflation and mortgage rate and uncertainties raised related to the continued strength of the housing market and the ongoing COVID crisis. Actual results may differ materially from those expressed or implied in the forward-looking statements. For those who listen to the rebroadcast of this presentation, we remind you that the remarks made herein are as of today, April 28, and have not been updated subsequent to the initial earnings call. Important assumptions and factors that cause actual results to differ materially from those in the forward-looking statements are specified in our earnings release issued today as well as in our annual and quarterly SEC filings. Also, certain non-GAAP financial measures will be discussed on this call and per SEC rules. Important information regarding these non-GAAP financial measures is included in our earnings press release and slides. Last the industry data referenced during today's call is based on NAR's most recent public estimates, which are subject to review and revision. Factors that may impact the comparability of our home sales statistics to NAR are outlined in our annual and quarterly reports filed with the SEC. Now I will turn the call over to our CEO and President, Ryan Schneider.

Good morning everyone. I'm incredibly excited to be with you today to discuss our strong first quarter 2022 results. Realogy continues to strategically transform our business as we move real estate to what's next. When we last spoke in February, I shared Realogy's 2021 progress as we completed the first chapter of our transformation highlighted by profitable organic growth, substantial market share gains, a transformed balance sheet with much lower net leverage and proven cost discipline, all driven by great talent in our increasing technology leadership. Q1 of 2022 continued that success excluding the unseasonably high 2021, we delivered the best first quarter top and bottom line results in the company's history. Revenue was $1.6 billion and operated EBITDA was $69 million. The latter is more than double recent Q1 results like $32 million in 2020 and $34 million in 2018. We grew our luxury and premium heavy owned brokerage business 10% year-over-year substantially outperforming the industry. We saw some really powerful geographic trends with standout strength in New York City and Florida. Our franchise business volume was up 1% year-over-year and overall Realogy delivered 4% year-over-year volume growth in the quarter in line with the industry and our expectations, including higher prices with a bit fewer units. Our core business drivers continue to perform very well. We increased brokerage agents 6% year-over-year, the seventh consecutive quarter of sequential growth. We achieved incredibly high brokerage agent retention as our very strong product technology and brand value propositions increasingly attract and retain agents at tremendous scale and our franchise business expanded and we're especially excited by the ongoing growth of our corporate high-end franchise brand. We fortified our balance sheet by retiring 1.1 billion of our highest coupon notes, which will lower our annual interest expense by over $40 million. We printed a three times net leverage ratio, the best Q1 result in company history. This result is right in line with our target and what we expected given the return to seasonality. Now, strategically we closed our underwriting joint venture with Centerbridge Partners in March. We received our $210 million purchase price for 70% of the business and are excited for the future upside of this growth venture given our continued ownership stake. On another strategic topic, we are really focused on our real estate joint venture. Remember we remain skeptical of the pure iBuying concept. We are compelled by the power of helping consumers buy and sell their homes in an easier way. We continue to invest in Realsure, expanding our RealSure Buy product to seven cities in the quarter. And our RealSure Sell product is now in 25 cities. We are played by what we're learning from both our direct-to-consumer and our agent marketing and believe we are built a special thing in this part of the market. Now, the biggest challenge we saw in Q1 was in our mortgage joint venture, where we lost $8 million in the quarter. Lapping a much higher mark-to-market from last year, combined with very tough rate and margin trends that emerged in Q1, negatively affected both Q1 results and our mortgage outlook for the full year 2022. But overall, we are really upbeat about the Q1 results we delivered, especially versus history and we love the momentum we continued to generate. Looking ahead for 2022, we now expect to deliver operating EBITDA in the $750 million to $800 million range with the change driven primarily by the challenges we and others are seeing in the mortgage business since we set our guidance. We will remain proactive on cost management, including the execution of the full year cost savings plan we outlined for you last quarter. And with increasing uncertainty about housing in the near term, we always try to share with you what we're seeing. So on the positive side, we continue to see very strong demand. Over 50% of our listings are selling within two weeks. Multiple offers per home and sales prices above list price measures are still meaningfully above historical norms in our portfolio. And the premium and luxury parts of our portfolio are showing the most strength as you can see in our Q1 brokerage numbers. And our number of listings on $500,000 and up properties is actually up versus 2021. If we had more housing supply, we could definitely sell it across all price points. On the more challenging side, the combination of limited supply in rising rates is clearly hurting the lower end of the market, especially, the first time home buyer. Our number of listings on properties below 300,000 in our franchise business and below 400,000 in our own brokerage business are down versus 2021. And to give you a sense of our latest data through about the third week of April, our closed transaction volume looks in line with our current forecast and our open volume is a bit below our current forecast for the month. So our volume guidance for 2022 is currently unchanged at mid single digits, but we're watching this closely and we'll keep you updated in these calls on what we're seeing. And remember the rough metric that about one percentage point of volume is worth about $15 million of operating EBITDA in our business. So, while the near term volatility in the housing market is tough to predict, we remain convinced the medium term outlook for housing, especially over the course of this decade, anchored in positive demographics and social trends remains bright. So I'll now turn the call over to Charlotte to discuss Q1 in more detail.

Thank you, Ryan. Good morning, everyone. Realogy, once again, delivered another strong quarter of results. As Ryan mentioned, our Q1 revenue was the best on record. And our Q1 operating EBITDA was second only to the outstanding results we delivered in Q1 last year, and more than doubled that of 2020. This consistency of delivery, strong financial discipline and continued momentum, reflects the strength of our underlying business. And we are leveraging the strong foundation to execute on the offense as we embark on the next phase of our company's transformation. Now let's get into the Q1 financial highlights. Q1 revenue was $1.6 billion, an increase of $88 million or 6% versus prior year. Our best ever due predominantly to 4% transaction volume growth in line with our expectations. This was led by outsized performance in brokerage with transaction volume growth up 10% year-over-year and our strong Q1 results were on top of an already strong Q1 2021, with volume up 44% year-over-year. Q1 operating EBITDA was $69 million, down $93 million prior year due to lower mortgage JV earnings, higher operating expenses and lower title agency earnings. Even with the mortgage headwinds, Q1 EBITDA of $69 million was much stronger than Q1 2020 of $32 million, Q1 2019 of negative $4 million and Q1 2018 of $34 million. In the quarter, we realized $11 million in the cost savings and are on track to deliver approximately $70 million of savings for the full year. For this program, we are focused on driving continued efficiency and agility driven by automation, systems integration and other personnel related efficiencies. Q1 interest expense improved by $20 million year-over-year due to higher mark-to-market gains on interest rate swaps and lower interest expense due to our Q1 debt reduction and refinancing. And we closed the 70% sale of our underwriter business to Centerbridge on March 29 and remain very excited about the growth prospects of this JV. The transaction drove $131 million gain on sale recognized in Q1. Post-close, our retained ownership is reported in equity earnings from unconsolidated businesses, along with our mortgage JV. As a reminder, the operating EBITDA impact is worth about $40 million versus prior year and will impact year-over-year comparisons to revenue and other P&L metrics. Now I will briefly highlight our business unit results, Realogy franchise group, which includes lease and relocation delivered one of the best first quarters on record with Q1 revenue of $267 million, an increase of $13 million versus prior year and net royalty per side of $413 was an increase of $31 versus prior year. Operating EBITDA of $138 million was largely flat to the high of Q1 2021. Realogy Brokerage Group delivered its strongest top line quarter with Q1 revenue of $1.3 billion, up $93 million versus prior year. Transaction volume growth up 10% was driven by strength in Sotheby's International Realty and Corcoran. Operating EBITDA was negative $40 million, a decline of $35 million versus prior year, largely due to expense timing, higher commission costs and the return to more normal seasonality in our P&L. RBG generated operating EBITDA of $46 million before the transfer of intercompany royalties and marketing fees paid to our franchise business. We grew our owned brokerage agent base 6% year-over-year with Q1, our seventh consecutive quarter of sequential agent growth and continue to have the highest agent retention on record for RBG. Commission splits increased 254 basis points driven predominantly by strong volume growth, agent mix recruiting and retention. We like the agent investments we are making to drive profitable growth. We expect some of these trends to continue, which will put further upward pressure on splits versus what I had shared with you last quarter and are reflected in our updated guidance. Realogy Title Group Q1 revenue was $190 million, a decline of $11 million year-over-year. The revenue decline was driven by three less days from our underwriter business due to the timing of the sale. Lower purchase and refinance volumes coming off the unseasonal highs of 2021 were offset by favorable purchase unit fees. Operating EBITDA was negative $3 million, a decline of $64 million year-over-year, driven predominantly by lapping exceptionally strong GRA JV earnings in the prior year. In Q1 2021, GRA benefited from sizeable mark-to-market adjustments, higher gain on sale margins and high refinance volumes. In Q1 this year, the industry saw higher mortgage rates and lower purchase and refinance volumes, which prompted a dramatic increase in mortgage competition, driving lenders to compress margin. We closed Q1 2022 with a very strong balance sheet and we will continue to execute against our disciplined approach to capital allocation. We ended Q1 with a senior secured leverage ratio of zero times and in that debt leverage ratio of three times. And we will continue to target a three times net leverage ratio through cycle moving forward. As a result of January's successful $1 billion, 5.25% notes offering, we reduced gross debt by a $100 million and redeemed $1.1 billion of high coupon notes. We reduced annualized interest expense by over $40 million and reduced our fixed rate cost of capital to 4.6% from nearly 8% just a year earlier. Cash on hand at the end of Q1 was $306 million. This is after taking into consideration $152 million of regulatory cash that was sold with the underwriter business and also includes a $100 million of debt reduction and associated fees to retire our higher coupon debt. Free cash flow was a use of $275 million, a typical seasonal outflow for the business. Finally, our capital allocation position remains unchanged. We remain committed to repaying the $407 million of 2023 notes on or before their maturity. Our highest capital allocation priority is investing for profitable growth. This includes investing more in the organic growth that has helped us grow share. And we continue to see opportunities for strategic M&A in our core business. We also see opportunities for M&A and investments in adjacent businesses and in technology to further accelerate our transformation. Finally, excess free cash flow, beyond what we think are good investments can be returned to shareholders with our Board authorized stock repurchase program. We continue to execute strategically and employ well disciplined financial strategies and are excited by our future paths to growth, which we will cover in more depth during Investor Day on May 12. Realogy is leading the market and growing share with a strong core business, additional growth factors like RealSure and other JVs, first class brands, talent and technology. We are at a very exciting time in our journey and we believe we are well-positioned to further accelerate growth and shareholder value. I will now turn the call back to Ryan. Ryan Schneider Thank you, Charlotte. Looking ahead, I am most excited where our business is going in the upcoming years, which we will share during our May 12 Investor Day. To give you a preview, we plan to build on the attractive business that we have today and articulate new strategic opportunities for Realogy with the consumer to help transform home buying and home selling. We believe these opportunities will be great for consumers and agents anywhere in the transaction journey and will be economically attracted for Realogy will help future proof the company and will even be part of moving Realogy to a different competitive set. Our new COO, Melissa McSherry who joined us in February from Visa will also describe this transformation, including product and technology innovation proof points we are already delivering. And Charlotte will share our 2026 financial targets, including the new growth opportunity sizing and what it means for our balance sheet and capital allocation. Finally, I want to give you more exposure to our great talent as an important component of our Investor Day. And we’re really proud of the recent recognition as one of LinkedIn’s top 50 companies for talent in the U.S. for the second year in a row. So with my excitement about what’s ahead for us, we will now take your questions.

[Operator Instructions] Our first question is from Ryan McKeveny with

Hey, good morning. Thank you for taking the question. So Ryan, the 2022 guidance change you called out the impact of higher rates and in particular, the impact on the mortgage JV. And I think Charlotte, you also mentioned higher splits are a component too. So I guess reading between the lines, do those comments generally imply that the embedded outlook for volume at the brokerage and franchise has not changed much since last quarter, even with higher rates and it’s more so just the – again the mortgage and split dynamic. So maybe if you can start with connecting those dots and maybe just give us a general update on kind of how you’re thinking about the resell market and transaction volume playing out through the year and ultimately embedded in that guidance.

Well, thank you for the question, Ryan. Look, it’s more than implied. To be blunt, I did literally say our volume guidance is currently unchanged at mid-single digit growth, because we looked at what happened in the first quarter, what’s happening in April, our mortgage business and the whole mortgage industry took a pretty tough hit. And the lion share of that $50 million kind of shift in the guidance is mortgage. It does incorporate a few other things around the margin, but we’ve kept the volume guidance where it is really given the frankly quite strong demand that we’re seeing out there in the market, especially in the kind of $500,000 [indiscernible], which is where our business does kind of skew. There’s a lot of uncertainty, but I think the headlines are probably more negative than the data is out there. And so we tried to give you the positives, we were seeing on the market volume side, as well as a couple places where there are some negatives and we worry about it. But for now we’re sticking with the kind of mid-single digits. It’s what we delivered in Q1. It’s what April’s looking pretty close to or at on volume in terms of closed volume. And obviously, we’ll see where it’s going from here, but the rate and margin dynamics and mortgage took a really big hit at our mortgage business in the quarter, as you saw with the $8 million loss. And again, that is the majority of the reason that we’ve changed the guidance is what’s happened to our mortgage business.

Got it. Thank you very much. And Charlotte, I guess on the cost structure, if we fast forward beyond 2022 and let’s just say if 2023 is a year where for the industry there is lower transaction volume. Can you talk about the levers or how you think about the levers that can be pulled to try to limit margin or the margin impact if let’s say for the industry? And let’s say for you guys, if revenue in the brokerage segment and even the franchise segment is down, would those costs or expense categories be similar to ones you’re already focused on with the cost savings or are there other categories you’d take a closer look at if it turns out the market does start to slow more materially next year.

Okay. Thanks for the question. And so we’re excited. We’re actually going to share more about this on May 12 at our Investor Day too. It’s really two streams like the stuff that we’re doing now, there’s definitely a lot more we can do on the efficiency front. And we’ll share more about that on May 12. So I think we have years ahead of us where we have still additional cost savings that we can go get through efficiencies, automation, more systems integration, things like that, but the housing market is a separate thing. And I think we showed you during COVID, depending on how dramatic, there are movements in the housing market, there are other things we can do of a more temporary nature like calling back, travel and entertainment, meetings and conferences, whatever there’s more discretionary spend that we would attack if there was something dire going on in the housing market. So I see it as really two streams and they’re both accessible to us and we’re full steam ahead on what we consider the more transformational ones that will set us up for future success ongoing, but the discretionary ones are always available to us to depending on dramatic swings in housing.

Ryan, we have a pretty good proof point on that in terms of 2020 and what we did on a lot of the discretionary stuff there at the start of COVID and so we can talk more about that in 10 days, but that’s a proof point that, that we’ve actually delivered on what you’re asking in the past.

Yeah, absolutely. Okay. Thank you very much, guys. Appreciate it.

Thank you, Ryan.

Our next question is from Anthony Paolone with J.P. Morgan. Your line is open.

Yes. Thank you. Good morning. I guess first couple for Charlotte. I understand the tough comps in 1Q that you laid out, but can you maybe help us with a bit more as we try to roll into the second quarter and anything to think about as it relates to whether it’s the mortgage JV or sale of underwriting try to just make sure we clean up numbers for 2Q.

Yes. So I’ll start at the top of the P&L with revenue. So we are lapping 85.5% volume growth last year, and the industry was at like 53%. So we have a very, very strong volume quarter that we’re lapping. So keep that in mind. And you’re right. The sale of the underwriter has a material impact on our revenues and the title business. So I think we’ve laid out the split between sort of title agency and underwriter pretty clearly, but I think that’s definitely going to impact revenue. And on the mortgage side, we had this outsized mark-to-market adjustment, which was much more sizable in Q1 than it was in Q2. It will still be an impact, but the impact is probably more driven by lower gain on sale margins this year as it relates to the competition that’s going on in mortgage because of the lower volumes. So I think mortgage definitely will continue to be a struggle for us, but it’s less about the prior year comp. We definitely need to strip out the underwriter both at revenue and at EBITDA. And then on volume, really that, that 80% – just don’t forget about that 86% volume growth. The thing impacted us too in the first quarter that won’t be quite as bad of an impact is operating expenses. So the operating expenses were intentionally higher in the first quarter, as we caught up a bunch on sort of the travel and meetings and agent facing things that we hadn’t done in Q1 of last year. So while it was a severe impact in Q1, it will definitely be less of an impact. So on the underwriter, don’t forget to just add back in sort of our less than one-third share of that. But those are the biggest drivers I would say. And if there’s anything else you need just let us know.

Okay. Thanks. No, my other question was going to be around expenses and you kind of touched on that. But as we think about the rest of the year, you’d mentioned the higher OpEx in 1Q. So if we look at that number, is that higher just than a normally would be seasonally? Or is it you think it’ll actually OpEx will be lower in 2Q than it was in 1Q?

So how I think about it is, let’s start with the cost savings. We had $11 million in the first quarter I would expect the rest of the year they would build as we go. So you could expect sort of a similar amount in Q2. And then it’ll probably improve as we get into Q3 and Q4. The $35-ish million higher OpEx in Q1 was driven by those – predominantly by those things I was referring to like ketchup expenses. There were some one-offs. So I think that you should assume that that’s huge uptick versus prior year would be much, much, much smaller than it was. So you could sort of back off, like call it $25 million or $30 million worth in the second quarter of that increase year-over-year.

Got it. Okay. Thanks for that. And then just maybe a couple for Ryan. You’d mentioned last quarter, your objective this year of gaining market share. And I think the 4% system volume was pretty close to NAR, I think in the first quarter, so seemed consistent. But I guess just more specifically, when you say gaining market share, what are you looking at to measure that? Because agent count up 6%, but I don’t know what NAR agent count was. So just trying to gauge like how you’re measuring that.

Yes. You’ve already got it, Tony. We look at total volume, literally just total volume and we do use the NAR volume as kind of as a core metric there. So we kind of held share in the first quarter. Though, our owned brokerage business where we make kind of higher unit – higher money per unit, kind of was more than double NAR in terms of growth. So we felt really good about that. But that’s kind of the metric that we use. We’re excited about our business drivers. We do have a little bit of inorganic kind of growth happening, likely this year as we – Charlotte talked about strategically. But we absolutely still have that as our objective. And we’ll measure it against kind of that public number and so you’ll be able to see it and obviously we’ll talk about it.

And to that point, Tony, just remember too, like we were significantly ahead of the NAR last year in Q1 and Q2, like I just mentioned. The latest full year NAR forecast is I think minus 1 or something, and we’re still sort of in the mid single digits. So you may not see it every quarter, but it’s sort of – it evens out in the wash based on sort of part of the prior year comparisons too.

Okay. Understand. And then last question, there’ve been some headlines in the last week and even your filing around some of the lawsuits in the industry, which seem to be geared toward buy side commissions. I don’t know how much you can really say about the lawsuits, but just bigger picture. Can you comment on just how you’re thinking about, if something does change with regards to perhaps unbundling commissions? Like how you would react or what the plan would be for Realogy? What you think the implications on the industry would be?

Yes. Well, look, as you kind of said, there’s really – there’s not a lot of comment I can do on pending litigation, Tony. We believe the lawsuits obviously don’t have merit and we’re going to defend them vigorously. But to your question, I think you should know we take them seriously. And we’ve got an experience both executive and legal team on these kind of big litigation matter, both in this industry and in other industries. And I would want you to know, I think we’re doing all of the strategic and legal things that our shareholders would want us to. But at the end of the day, we believe they don’t have merit. We’re going to defend them vigorously. And I really just am not going to be able to comment much on pending litigation.

Okay. Thank you.

Thank you, Tony.

Our next question is from John Campbell with Stephens. Your line is open.

Hey guys. Good morning.

Hi, John.

I think you guys have probably given us enough puzzle pieces to kind of put this together, but I’m hoping you guys might be able to shortcut this. After stripping out the title, underwriter earnings, what’s the underlying EBITDA margin for the title agency business?

Yes. I don’t want to misquote that. I don’t have that right at my fingertips, but we’ll follow – I know we have calls later to follow up with you on that. I don’t want to misquote it, so I’ll give it to you when we’re on our later call.

Okay.

It’s a 40-60 split though before, like if you strip out the GRA piece, it’s a 40-60 split.

Okay, great. And then I saw the Coldwell Banker Bain acquisition. Can you guys talk to just the expected impact to volumes for you guys? And whether that’s kind of a one-off opportunistic bill or if that’s a sign of kind of the growing appetite for M&A? It sounds like you guys kind of hinted at that, but just your thoughts.

Yes. We’re glad to have done the Coldwell Banker Bain up in the Pacific Northwest. It’s the one geography where we don’t have – if you go – if I step back John, our own brokerage business skews luxury and premium, right. We’re in about 50 geographies, average price point in the Coldwell Banker side is like $560,000, average price point in Sotheby’s and Corcoran is like $1 million plus, right? And the business is kind of architected to be in some of the best geographies with both that luxury and kind of skew, but also with high growth. And when you look at our map, there’s really one place where we actually don’t have a presence as a kind of luxury premium kind of owned brokerage business. And it’s right up there in the Pacific Northwest. And so, we think Bain’s a good opportunity to really kind of fill that strategic gap in our portfolio. It what an existing franchisee and so there’s – so the volume change in the near-term is just kind of swapping from franchise to brokerage, but obviously we make a lot more money every unit on the brokerage side. And then, we’re excited about both the growth potential under our leadership and kind of the market growth potential. So, kind of not having something up in that Seattle area kind of stuck out when you look at kind of our geographic footprint. And this was a really nice kind of market, one of the market-leading company ways to fill that. And so we did go ahead and do that here this month. We can give you more financial detail in next quarter’s call, but that was an April thing. And we’re glad to have done it and hopefully consistent with kind of the luxury premium kind of lean that we have. And again, that’s the place we’re actually still seeing a huge amount of strength in the market is demand is way outweighing supply. And so we’re really happy to have Bain and all their agents and employees part of the company.

Okay. That’s great to hear. And then Ryan, if I could squeeze in one more. You talked about April, the April closings kind of holding the line on the low single digit growth. Do you have the exact or the details around just the open orders of the listing you’ve seen thus far in April?

I have the exacts and I frankly, without giving you the exacts, which I’m not going to do, the listings being up in 500,000 and up includes April. The listings being down at the lower end includes April. And then, as I said, the open volume for April it’s a bit below our current forecast for the month, and then the closed stuff is kind right on our current forecast.

Okay, great. Thank you, guys.

Yep.

Our next question is from Matthew Bouley with Barclays. Your line is open.

Good morning, everyone. Thank you for taking the questions. So on the mortgage JV, realizing there’s a lot of moving pieces around competition in that world. And maybe the speed change in interest rates makes a difference here too. And again, I know the business is early and it’s scale up. But I’m just curious for a little hand holding on that. At today’s scale, is there kind of a framework for what kind of mortgage rate drives I don’t know, call it breakeven profitability? And then, as you scale this up over the years, where can you sort of take that that breakeven interest rate, if that makes sense? Thank you.

Yes. So it’s a couple different things you got to think about. This is – you’re right. So the speed of which the mortgage rates changed definitely had an impact on competition. You’ve seen this for decades it’s just what happens in the industry. And there's an acute period of a couple of months, two, three, four where everyone sort of gives on margin and then eventually it sort of evens itself out. So in some cases, you just can't look at one quarter, you've got to, it's something that's going to flow throughout the quarter. But on top of what's going on with the gain on sale margins and lapping these big mark-to-market adjustments, we're still making conscious choices to invest in this business to grow. That's a choice we're making. We don't have to do that, but we're still recruiting officers, there's still expenses that we have that are discretionary. So even in like today's environment we could be making different choices and sort of breaking even or making a little more money than we're making now. But this is more about the bigger picture for us. And we love the integration of this business to ours. So we're willing to take a little bit of short-term pain for the long-term. So I think we already have the tools to be able to do that. We're just choosing to invest in this business for growth at this time. And the way you have to think about it too is it's like purchase versus re-fi. And the re-fi is just crazy when you get it, there are periods of time over history where that's just going to be sort of an additional volume benefit, but you can't count on that for the long-term. So you got a plan for what you think your purchase volume is going to be and that's really why we're making these in investments for the future to kind of grow share.

Got it. Okay, that's very helpful. Thank you for that, Charlotte. And then on the commission split commentary, apologies if I misheard it, but I mean, it sounds like obviously the change in the guide predominantly the mortgage JV, and you're saying that, I don't know if we should maybe just back into what that change in commission splits, if that's the rest of the difference. I'm just curious if you can give kind of an updated target on that and maybe thoughts on the cadence of splits through the year?

Yes. So the splits are definitely a much smaller impact to the guidance change impact, very small. There's a bit of sort of what I'll call like seasonality and some of these split increases. So what we're seeing in Q1 we still – we have a bunch of recruiting that we're doing that we like, but as you bring in an agent the volume doesn't sort of hit later in the year. So we're seeing higher split increases versus prior year as the agents are just coming on board and the volume kind of comes later. So that's part of the driver. There still was a small hit from property frameworks, the sale of that business in Q1, so that call it a 20 basis point hit. So Q1 is definitely higher than what we see. It's not like I wouldn't forecast the Q1 rate increase for the rest of the year. But to the degree we're still doing active recruiting and the recruiting we're doing is what we call company dollar positive. So the revenue we're getting from these agents more than offsets whatever we're doing on commission splits with them. So I would say the phasing it's more acute in Q1 for some of the reasons that I just said. But the one thing you can't which is a variable that we're just all stuck with, and it's sort of like a feast of riches here but when your volume is high and you're growing volume on top of already high volume that you had in the prior year, this is driving agents to be at the higher end of their table, and they stay at the higher end of their table until the volumes sort of fade away. So we actually like the higher volume and we'll take the higher split that goes along with it. One other factor too, is agent mix. When inventory is so tight, we are continuing to see the higher end agents get a bigger share of the volume and they are at higher rates. So that is again, it is to live with, but hopefully that extra call helps.

It does. Thank you very much, Charlotte. Thanks everyone. And good luck.

Thanks, Matt.

Our next question is from Tommy McJoynt with KBW. Your line is open.

Hey, good morning guys. Thanks for taking my questions here. With many of your brands catering toward the high end of the market, is it fair to think that Realogy's buyer cohort is somewhat less exposed to higher rates given more all cash or no financing purchases? And do you know how specifically what percentage of your volumes are all cash versus those figures that we can see reported by [indiscernible] monthly?

I don't have the all cash numbers to give you kind of by brand here, but where I would start is your statement is really actually very true for our brokerage business. I mean, our own brokerage business like I talked about is architected to be in the higher growing, higher price, more luxury skewing geographies, as is our Sotheby’s franchise business and our Corcoran franchise business and so, those parts of our portfolio, which are quite large, I mean, by far the majority, do skew much more luxury and are, I think, a little less rate sensitive. We know the percent of deal are all cash are much higher, et cetera, et cetera. Now, we still do a lot of deals in the mass market side. And we do a million transactions at a $345,000 price point. Those are a hundred percent franchise busineess. The economics are a little different. And so, we're not immune at all as a company, but we do have more skew toward the part of the market that uses mortgages less and maybe a little less rate sensitive on some of that stuff.

Okay. That’s helpful, Ryan. And then kind of along a similar kind of thinking about the affordability constraints with mortgage rates, having risen, do you have any concerns or kind of any intuition that some of the recent activity in-housing has been a pull forward ahead of fear is that rates could continue to rise further?

Actually, no. I mean, look, I think, in 2020 we saw a little pull forward maybe if people buying second homes, kind of in the depth of COVID. But no, I mean we are operating in a world where rates are rising, but it's very supply constraint, right. And demand is incredibly strong, right? You've got a demographic thing happening with demand, not only just the millennial generation guys, but like the five biggest birth years of millennia’s are going to be turning 35 here in the next few years effectively. And so like, it's the biggest part of the biggest generation. You also have the migration to better tax weather environments, we have the remote work thing. Demand is just a lot higher than supply out there. We have more houses we could sell them and rates are not necessarily stopping that. At the risk of going a little long here, I was reading a transcript from one of the builders and they did they did a survey then they said, and this is just kind of from their transcript that in response to higher mortgage rates impacting people's home search, only a single digit percentage of respondents said they would stop their home search as affordability became their constraint. Then they talk about people would pivot to smaller or different. And they also did that survey back in 2018, and they said the numbers were twice as high in 2018 that people would stop their home search with higher mortgage rates. So, we got rising rates in a supply constrained environment where demand is very high and while our mortgage business, I think, is going to take some pain, given what's happened in the mortgage market, part of the reason we haven't changed our volume outlook is what we actually see on this demand thing happening even with rising rates. So it's a very interesting thing to have rates rise in such a supply constrained environment when demand is both high and I predict, continue to stay high not just probably for this year, but I think, there is a demographic thing for frankly, most of this decade.

That's great. Thanks, Ryan.

Our next question is from Justin Ages with Berenberg Capital Markets, your line is open.

Right? Thank you. And good morning.

Hey Justin.

I was just hoping to first get an update on RealSure I know you mentioned you opened in more cities. But hoping to get a sense of the translation from interest in the service and people wanting to sell the home and that turning into transactions where Realogy has an agent on the actual transaction.

Yes. Look, we like what we're doing. We think there is a few other people usually frankly kind of smaller kind of startup kind of companies trying to do the same thing. And we think it's great. We think there's a real opportunity. We think we've got something special here because we don't think what traditional brokerages are doing is enough. And we don't think the iBuying thing is the future fully either. So we really like it. Look, we're winning a bunch of incremental listings. I've given you stats on that in the past. We don't end up buying very, very few houses because again, our agents are successful selling them. But we're also still in the growing phase. We're only in seven cities on the buy side, we're still training agents in places and we're still experimenting with different direct-to-consumer and agent marketing kind of thing. So, it's a good growth thing that we’re really going to in this year. But part of the reason we are investing is the things we see about winning listings, gaining share from this, getting more deals, succeeding with the model that we've got. We like the early proof points.

All right, thanks. That's helpful. And then switching gears, and maybe this one's for Charlotte on capital allocation and sorry if I missed it, can you just talk about when the share buyback becomes more attractive, I guess, vis-à-vis the organic growth that you put at the top of your list?

So there's two ways to think about it. I was trying to be pretty clear in the script. Our priorities are, we're definitely retiring our 407 due 2023. We're committed to that and we're going to do that. And it shouldn't be lost on you the effect that a lot of the investments we're making are having in our core business, and in the market share. So to the extent that those opportunities are available to us, and we like the returns we're going to get, we're going to do those. But it's not lost on us what's happening in the sort of the capital markets, and we watched this stuff. So the priorities are in the order that I gave you on the call, but don't misunderstand that we don't watch things in that, we're on top of things and we'll make the right choice at the right time for our business, and for our shareholders.

All right. I appreciate the color. Thank you.

Our final question for today will come from Kwaku Abrokwah with Goldman Sachs. Your line is open.

Hi guys and congrats on the quarter. I have a couple of questions, if you don't mind. I think Ryan, you talked about inventory being tight and demand exceeding the supply. So I'm trying to get a sense of, I think I've asked this question before multiple times, but sort of what will incentivize the home owner to bring new supply onto the market. I'm trying to get your perspective here. Given that we've been in multiple markets now, a low rate environment, now we're in a high rate environment. I'm trying to get a sense of what and where, like at what point do you think the homeowner would become more interested in listing their home?

Well, the first thing I'd say is, I think we should all always go back to the difference between inventory and supply. So for example, somebody referenced the national station of realtors forecast. If you look at the forecast they put out yesterday, they're forecasting about 5.6 million units being traded in the resale market this year. Now that's down from about the 6 million units of last year, and that's consistent with our guy that we think we'll have fewer units, but higher price. The 5.6 million units is actually, I believe the biggest number that this – that we would've had as a market if you look at 2010 to like 2019. So it's literally a year that would actually have more units being traded than any time in the last decade. So clearly there are a lot of people putting their house on the market, but because of the demand being so high for the reasons I talked about earlier, the houses are moving much quicker. And at any moment, the inventory is clearly thinner especially at the first time home buyer and the low price area. So people are putting their house on the market, but they're just not staying there very long. And they're putting the house on the market, partly because of those social, both migration and remote work got trends, plus the normal kind of reasons people move. For me there's two things one is, is there still a little bit of a, like kind of post-COVID kind of bump of people who were kind of – who didn't really think about moving or selling their house during COVID that could actually help. But the second is, is frankly just the need for more supply which is why it's why I spend time with the builders and I'm rooting for them and they're awesome. And also why as an industry leader, Realogy, we spend time at the kind of federal and state level and even the local level sometimes doing anything and to encourage anything that'll make home building easier. So I think we actually have a bit of a kind of social problem with just not enough housing here, but I do want people to remember that it's not that people aren't putting their house on the market, it's that demand is so high that they're not staying on the market for as long, because again, 5.6 million units and again that's just somebody's forecast, but I think it's reasonable. That would be the biggest amount of housing sold any time in basically the last decade other than the last year. And I find that to be quite striking and just give you a sense of why I keep saying there were more houses available we could sell them. That's the issue, not that just inventory is tied at any one moment in time is my personal view.

That makes a lot of sense. And thank you for that. That really good color there. Moving on, and maybe this is more for Charlotte, but I'm just curious on relocation. Do you guys have any update on where the business is heading through 2020 through the end of this year? If you mind given that the economy is really opening very quickly and we're accelerating into the summer.

Great question. And we have some green shoots of recovery for sure. And you'll see it in our reported results. Our business is stronger this quarter for sure. And we feel good about the second quarter. So things are definitely coming back. There are two other things though to keep in mind that types of moves may be different. So there may be companies willing to do like a lesser expensive sort of reload, which is maybe a little bit less profitable for us, but there's a ton more of them. So the type of move might have changed a little bit in the short term. And while, the global economy may be coming back a little bit more in some places, there are still are some places that are really kind of ravaged by COVID. So it's not the same story in every part of the geography financially, our results are definitely improved. So we like the green shoots, but it's still sort of a tale of two cities right now, depending on the types of moves on the geography that you're in.

I'll give a quick shot after the team, by the way, our team and the relocation team has put kind of a couple really good technology products out move pro 360 and a new referral platform that both are getting really strong feedback and frankly, I believe gained some market share in that business, albeit in the tough environment, Charlotte described both with new clients and kind of with more business from some existing clients. So, we're primarily a U.S. brokerage kind of driven company, but given that you asked the question it's it is nice to see if you green shoots and to see that our team is still, focused on creating value there for their customers.

That's great. Thank you. And the last one for me, if you don't mind, the closing of the title underwriter, I'm just curious as to when that the $210 million of cash will hit the balance sheet, given that, I think you recognize the $131 million of the non cash gain in the statement of cash flow. I'm just curious, like the timing difference between, when the cash will actually show up on the sheet?

Yes. The cash already hit, but a lot of it right up went right out the door immediately because we had to transfer the statutory, the regulatory cash tied to that business. So of the moneys we got in 152 went right back out because they went along with the underwriter business, that's regulatory cash tied to that business that has to stay with the business. So we already saw, but it was blunted by, the fact that the vast majority of it went back along with the business. It was cash, we didn't have access to do use anyway, because it is regulatory cash it's required to be held in that business. So while it always within our balance sheet, it wasn't like we were able to use that cash.

Yes. And I recall you guys always get the readily available cash number, and I'm guessing that's the difference. And so on a go forward basis that difference between your cash and the readily available is going to become a lot closer, basically.

Yes. And just also remember that we spent a $100 million to retire some debt. We didn't refinance the whole thing in the first quarter. And then, that was much higher coupon debt that wasn't, we had high fees associated to retire that debt, which you'll see in the press release as well as in the queue. So there was a lot of choppy stuff going on in the first quarter.

Appreciate and best of luck for the rest of the year.

Thank you.

Thank you.